Aftermarket Update ― 2012

Parts and service have become key contributors to the success of truck dealerships. Long gone are the days when they were considered a necessary evil if you wanted to sell trucks. Today for many dealerships their parts and service performance determines their success with new truck sales. Service sells trucks, in other words.

During the recent Heavy Duty Aftermarket Week, Kumar Saha, industry analyst with Frost & Sullivan’s Automotive & Transportation practice spoke at length about the competitiveness of the aftermarket and key trends that are occurring now and will continue to impact business in the future.

Saha believes that the continued economic uncertainty will keep the age of the nation’s fleet higher than it historically has been. This bodes well for overall parts and service sales and presents an opportunity for dealers who historically have not enjoyed a large amount of parts and service from the second and third vehicle owner. Growing consolidation of the independent aftermarket, which could result in more of a network feel, may intensify the competition for parts and service business from owners of these older trucks.

Offsetting this is the fact that since 2007 there has been an increasing amount of verticalization of OE components on heavy-duty trucks. An increase in the number of proprietary components benefits dealers and gives them a chance to show owners of older vehicles that they can be competitive on non-proprietary components as well.

Other trends that are impacting the aftermarket according to Saha, include the improving quality of OE parts; advanced technologies driving up the operating costs for repair facilities; value-priced replacement parts from Asian manufacturers; stringent emissions, idling and safety regulations; and the rise in component complexity.

Dealers’ strong technological expertise in performing advanced repairs is one of their strengths, especially when coupled with the benefits they reap from the verticalization trend. Where dealers fall short, according to Saha, is that their price for parts and service typically is higher than other channels and they are slower at service turnaround.

Distributors tend to be more competitive on parts and service pricing and have the ability to off all-makes premium and value priced parts. However, they have a limited capacity to preform powertrain service and are weak in centralized distribution, Saha says.

One of the primary drivers of aftermarket growth going forward will be a concern for safety. “Components such as tires, brakes and chassis systems will deliver stable revenue streams because of tightening safety regulations and fleet concerns over vehicle downtime caused by crashes or safety violations, Saha says.

Technical knowledge is going to take center stage in the aftermarket in the future as vehicle complexity increases. Dealers appear to be doing a better job keeping their technicians trained and are investing in the tools and equipment necessary to work on these more complex vehicles than their independent aftermarket competitors.

According to Saha, aftertreatment service will be another growth area. “Diesel oxidation catalysts, diesel particulate filters and diesel exhaust fluid replenishment will be the primary revenue movers for aftertreatment components.” However, these have low replacement costs and growth will not come from replacing them on existing vehicles but from retrofitting them on vehicles with older engines.

Beyond diagnostics, prognostics that can predict impending failures will be highly valued. For dealers the use of prognostics will allow them to address potential defects more quickly and to stay connected to the customer throughout the life-cycle of the truck, Saha says.

In order for dealers to make strides in parts and service sales for older trucks they must leverage the knowledge of proprietary and advanced technologies as well as offer menu pricing and reduce turnaround time.